Rathbone Global Opportunities: Fund rebounds 36% in three years as the manager eyes up cut-price retailers, tobacco companies and new tech firms

James Thomson, manager of the £189million Rathbone Global Opportunities Fund since 2005, had a difficult start to the financial crisis.

During the worst of the banking sector’s problems, his portfolio fell 40 per cent against an average loss of 30 per cent at rival, equivalent funds.

But Thomson’s recovery has been as dramatic. In the past three years the portfolio has risen 36 per cent, double that of rivals. The rebound restores the fund’s long-term record, which over a decade is impressive.

Thomson is a ‘high conviction’ manager, meaning that once he has formed opinions about markets or stocks, he backs them strongly.

His portfolio bears little resemblance to others, so its performance does not closely mirror the market or rivals.

As 2013 approaches he says he has ‘never seen views so polarised’, pointing to a range of respected commentators variously predicting a joyous rally or dismal slump.

He is uneasy about the fact that the market has risen through much of 2012, if slowly, and asks why share prices are so high ‘when sentiment toward equities is at a multi-decade low’.

More...

In particular, he worries about the US, which must tackle its debt, and China, where he believes growth is slowing faster than some concede.

As a result the sectors he avoids are those usually associated with healthy economies and confident consumers – car makers, airlines, banks, miners and retailers.

He also dislikes ‘dinosaur’ technology firms, for instance computer makers Dell and Hewlett-Packard, whose products, he says, seem outmoded in a world of tablets and smartphones.

The firms he owns are those that cope best in the gloom of ‘economic growth which is barely at stalling speed’. These are cut-price retailers, tobacco companies and ‘new’ technology winners, such as Chinese internet service provider Tencent.

Thomson also owns firms that benefit from the relentless march of bureaucracy. ‘If anything is growing, it’s red tape,’ he says.

To back this thought he owns a £5 million stake in Intertek, a firm that undertakes safety checks for global brands.

His caution is reflected in the fact that almost 20 per cent of the fund is in cash.

This is annoying to some unit-holders, but he is adamant, insisting that while he would like to be fully invested, the cash is sitting there ‘for the right opportunities’. Right now, these aren’t apparent.